The music industry is hastily changing due to the quick technological advancements. The digitalization of music has achieved to fundamentally raise every feature of the industry, from the method music is recorded to the way in which albums are marketed and distributed (Jihan Lee, 2015).
The evolution of the music industry
Before digitalization the market for recorded music was made up from several artists supplying their work to record companies who managed to produce and market their music. However, the record companies acted as oligopolies and had high prices which affected both the artists and consumers.
In 1980s digitization started to break down the previously rigid infrastructure of recording industry by eliminating the barriers within production, circulation and promotion which heled the record companies as “strong” for many decades (Curien, 2009). From a collaboration of Sony and Philips in 1981, compact discs were developed which became the first widely used digital format in less than a decade. CD’s was an economically successful transition as they managed to decline both prices and expenses in music industry.
However, digitalisation caused some issues to the music industry as piracy evolved. In the past, analog phonograph records piracy was immaterial as quality of record deteriorated with every copy made. In contrast, digital formats can replicate records countless times without harming the original records. Through this change, the revenues of music industry decrease by 40% with piracy causing physical sales to decrease and many record companies to dissolve (IBSCDC, case study).
By the mid 1990s, casual use of the Internet had grown significantly. Equally important, a new format called the MP3 was introduced with the ability to simultaneously and automatically decompress and playback digital files.
The Streaming Model
Streaming music services have profoundly changed the music industry and the way the audiences consume music as listeners have easy access to a universe of music, often for free. Even paid streaming services are much less expensive than physical media ever was; as a month’s subscription is the correspondent to the price of a single CD in the late 1990s. Streaming services have also helped reduce the amount of piracy across the music industry by shifting the balance between risk and reward for prospective pirates (Titcomb, 2017).
During 2016 IFPI recorded a 5.9% music market growth witch was the fastest rate of growth in music industry life. Sales of physical and digital music drop by 7.6% and 20.5% while consumption of music streaming increase by 60.4%. Moreover, subscriptions in music streaming apps like Pandora, Apple music and Spotify showed a huge increase with more than 100 million users paying for musical streaming subscriptions. The reason for that growth in streaming services were due to the increase in smartphone use, internet connection in public and online storage in music files.
Spotify and its Strategy
Spotify is a music, podcast, and video streaming service and was released in 2008 by Daniel Ek. Spotify operates under a “freemium” business model as basic services are free, while additional features are offered via paid subscriptions. Spotify makes mainly its revenues by premium streaming subscriptions to users and advertising placements (Spotify 2017).
Spotify has as mission statement “To help people listen to whatever they want, whenever they want” highlighting that users can get exactly what they are searching for through Spotify. (Andrew Walsh, 2011). This mission statement is easy to be read and memories underlining the main objectives of Spotify which is to promote music to everyone and anywhere.